We turn positive on Frencken (SGX:E28) as we see signs of revenue and earnings bottoming out, led by better-than-expected 3Q23 revenue traction from improving customer orders and a more positive semiconductor recovery outlook. Upgrade Frencken to BUY from Neutral, new S$1.45 target price from S$0.97, 28% upside with ~3% FY24F yield.
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3Q23 revenue ahead of forecast.
Frencken’s 3Q23 revenue of S$184m (- 6% y-o-y, +3% q-o-q) outperformed estimates. Growth was broad-based, with all segments posting positive q-o-q growth, except for industrial automation.
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The medical segment (+8% q-o-q vs -4% q-o-q in 2Q23, S$31m) saw higher sales to a significant customer in Europe.
The analytical & life science unit received higher sales in Europe and Asia (+6% q-o-q vs +1% in 2Q23, S$43m), and the automotive division was driven by products such as new antenna for EVs (+2% q-o-q vs -4% in 2Q23, S$18m).
Industrial automation was the only key segment that recorded lower numbers, being affected by a decrease in its customers’ capex (-59% q-o-q vs -12% q-o-q in 2Q23, S$7m).
Profit margin remained steady
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Above is an excerpt from a report by RHB Securities Research. Clients of RHB may be the first to access the full PDF report @ https://www.rhbtradesmart.com/.
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